New Year's CRM Resolution: Going on a Leads Diet
I've never met a sales rep who said they had enough leads, let alone too many. But I'm here to tell you that leads are the junk food of business. Time to go on a diet, consuming fewer leads...and only the right kind of leads.
Wed, January 04, 2012
CIO — There's no question that every company needs a solid pipeline of business -- that's what gives you predictability, profitability, and consistency. The question is, "how do you get more pipeline?"
And if you want profitability, businesses should be focused on the cost of customer acquisition. The problem is, leads are pretty far way away from pipeline. To ask questions about the cost of leads is focusing on the wrong thing: it doesn't matter what your answers are, they're wrong.
Why?
While it's easy to state the cost of leads, the value of any specific lead is indeterminate. Ask the sales guys, and they'll say that the leads they have are worthless. In many (maybe even most) organizations, 50 percent of the leads are not followed up on soon enough to make a difference...if at all. But if you assign a lead to somebody else, the losing rep will scream bloody murder that he can no longer make quota because of losing that one lead.
This isn't a snarky joke. This is a classic problem that's dealt with in behavioral economics and game theory.
When you have an item that has a low probability of having a very large value, it's not rational to run a weighted average. Think about lottery tickets: you have a 1-in-49 million chance of winning $75 million. The value of your ticket is $1.50, but only in the abstract. As a practical matter, your ticket is worth $0. In business school, we teach MBAs to value startup stock options that way. And that's how I teach my students to value leads.
Of course the probability of a lead converting is way better than a lottery ticket. But measuring raw leads just doesn't ... err ... lead to good decisions.
Job One: Get the Semantics Under Control
The main problem with discussing the value and quality of leads is that the conversation is based on a blurred and confused definition of the word "leads." Sales reps will often confuse a lead with an opportunity, implying that leads are very valuable. Your CRM system doesn't work that way.
So let's start by clearing that up (note, these semantics are for the enterprise sales model -- your firm's sales model will drive somewhat different semantics):
• Names are at the bottom of the food chain, because they aren't really leads at all. They are simply people whose names and contact information we've obtained through list purchases, e-mail blast responses, Web site registration, or other means. While they may have indicated "I want to know more," they have given us nothing about their intention of doing business with us. The goal is to keep these "not yet leads" away from the sales force, and to use marketing automation to nurture these leads at near zero cost.
